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Montel (Norway): UK nuclear plant faces axe after Engie stake sale – analysts

Tuesday 11 April 2017

UK nuclear plant faces axe after Engie stake sale – analysts

Montel, 20:09, Tuesday, 4 April 2017

By James Allen

(Montel) French utility Engie’s plan to sell its entire holding in the Nugen nuclear joint venture to Toshiba has cast fresh doubt on the already embattled UK project, analysts told Montel on Tuesday.

“It is clear that Toshiba/Westinghouse won’t build at Moorside alone, if at all, as they want to get out of nuclear new build,” said Antony Froggatt, a senior research fellow at Chatham House. “My assumption is that it is easier for Toshiba to sell the asset when it owns 100% of it.”
Others agreed the nuclear plant, located in Cumbria in north England, faces the axe. “[Today] the Moorside project moved further into the dark side of the moor,” said Mycle Schneider, a Paris based nuclear consultant, noting the lack of potential buyers.
On Tuesday, Engie said it would exercise its right to sell its 40% stake in Nugen to Toshiba, its partner in the joint venture, following the bankruptcy of the Japanese firm’s Westinghouse unit.
Westinghouse is due to build three AP1000 reactors for the new plant though last week the company filed for bankruptcy protection due to heavy losses and cost overruns.
Toshiba, which will become the sole owner of Nugen, will pay 15.3bn yen (EUR 130m) for Engie’s stake in Nugen.
Engie’s participation in the project had been in doubt for several months, with its new CEO Isabelle Kocher reportedly opposed to investing in new nuclear projects.
Toshiba has previously said it may not continue with the project, meaning the latest move places the future of the Moorside project in serious jeopardy, analysts said.

“Beginning of the end”

Toshiba’s purchase of Engie’s stake “looks like not only the beginning of the end of the nuclear project in the UK, but certainly a significant blow to the Moorside project, and hence UK nuclear energy policy,” said Paul Dorfman, a senior research fellow at the Energy Institute at University College London.
Korea Electric Power (Kepco) is a potential investor after its chief executive said last month it was in talks to buy a stake in NuGen.
However, the South Korean company would likely be keen to use its own APR1400 reactor as a replacement for Westinghouse’s AP1000 model, potentially delaying the project by a number of years, said Froggatt.
Last week, the UK’s nuclear watchdog approved Westinghouse’s AP1000 reactor design, though the APR1400 would need to start the socalled GDA approval process from scratch.
“Why would the South Koreans buy into a failing genthree reactor when they have their own relatively successful gentwo reactor?” said Dorfman, an antinuclear campaigner.
“In other words, it’s a reactor that wouldn’t pass a UK regulatory GDA because it doesn’t have enough safeguards. They would have to redesign it. That would take what? Two, three, four years? Then it would have to get through a UK regulatory GDA. Another four years.”

Such a move would punch a “huge, unmanageable hole” in the UK’s plans to replace aging coal and nuclear plants set to close in the 2020s with new nuclear plants, he added.
However, this might actually prove to be a blessing in disguise, he said. “Some would argue this is actually a very good thing given the crashing of solar and offshore wind and given the notion that, increasingly, baseload is an antiquated concept and much more flexibility is required in a modern energy market.”
EDF’s Hinkley Point C (HPC) nuclear project in southwest England got the final approval in 2016 after several years of delay, but only after securing backing from the French and UK governments. And yet still lingering doubts remain over its viability.
“It took Hinkley Point three years to put the finance package together for HPC, and that had the support of the French government. Toshiba has no money,” said Tom Edwards, an analyst at Cornwall Energy.

Hinkley pressure

With the Moorside project facing years of delays, at best, there would be now even more pressure on EDF to complete Hinkley Point, said Bruno Brunetti, a New York based analyst at Pira consultancy.
“The government strategy to secure new nuclear build in the mix will be now dependent largely on this project,” Brunetti said.
“However, with Brexit, the UK government will have more flexibility to design additional incentives – not only for Hinkley but Moorside as well – especially as the UK will no longer be bound by the strict EU state aid legal framework.”
Other experts disagreed. “The UK nuclear newbuild program is a house of cards. You take one piece out and the likelihood of general collapse increases significantly,” said Schneider.
“Increasingly given the shortage of viable candidates, it looks like the only option for the government if it is determined to push through the nuclear programme is for it to take a direct stake in the consortia,” said Steve Thomas, an energy expert at the UK’s Greenwich University business school.

Reporting by:
James Allen james@montel.no

Editing by:
Snjólfur Richard Sverrisson richard@montel.no

Republished with permission.

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